Blockchain Association Sues IRS Over New Crypto Regulations
Date: 2024-12-30 Author: Henry Casey Categories: BUSINESS
The Blockchain Association, along with the Texas Blockchain Council, filed a lawsuit against the IRS, opposing its new cryptocurrency regulations. This became known on December 28.
According to the approved rules, which will come into effect in 2027, brokers will be required to provide data on the gross proceeds from transactions with digital assets and information about taxpayers participating in such transactions. In addition, the definition of a broker has been expanded to cover decentralized exchanges (DEX) and platforms that provide transactions with digital assets.
Blockchain Association CEO Christine Smith said the new requirements violate the Administrative Procedure Act and the constitutional rights of citizens. She emphasized that the association intends to protect innovation in the crypto industry and decentralized finance (DeFi) in the United States.
DeFi developers and blockchain proponents are concerned that classifying platforms that use smart contracts as brokers will create serious administrative difficulties for them. The association notes that this could lead to the loss of the United States' position as a leader in innovation, since many projects will be forced to move to jurisdictions with more lenient requirements.
The head of the legal department of the Blockchain Association, Marisa Koppel, called the new rules a violation of the right to privacy, noting that the transfer of user data of decentralized platforms undermines their core values.
Some lawyers compare the situation to the case of Tornado Cash developer Alex Pertsev, who was sentenced to prison for creating software used for illegal operations.
The IRS estimates that the new requirements will affect between 650 and 875 DeFi brokers and up to 2.6 million U.S. taxpayers. Data collection will begin as early as 2026.
Industry experts are proposing several strategies for DeFi platforms. Galaxy Digital’s head of research Alex Thorn believes that platforms can either comply with the new rules, block access to U.S. users, or move to commission-free operations and minimize interactions with users.
Uniswap’s chief legal officer, Kathryn Minarik, called for a challenge to the new rules, saying the IRS is wrongly classifying DeFi as brokers. Uniswap CEO Hayden Adams expressed hope that the decision will be overturned through Congress or lawsuits.
